yes, but how long will it take for G to figure out when Cpa will work vs CPC. will it cost me $20 in lost revenue for each new advertiser? $10, $5? How much in lost earnings while each ad is "tested" on my publishing space?

And that's the problem. if they're going to test, then the savvy marketer will simply churn their ads constantly so none convert well ... if they're running a model where online sales conversions are the point. (800 numbers, branding, directions to business...)

So CPA ad will appear when google thinks that it will make more money to publisher than CPC&CPM ads. That would solve most of the problems with CPA ads discussed here.

The issue is the CPA model is going to be the more favorable option than PPC... to most advertisers ...

What happens when Google maintains a 90% CPA only advertiser inventory?

If that happened I would be sending all the advertisers tutorials on how to make converting landing pages or else as a publisher I wouldn't earn much... :)

Google would need to do either or all of below to make CPA work in my opinion

A. Standardized landing pages at least for "product" purchases... As far as Lead Generation it is a whole other area.. cause the more fields and questions a advertiser has on their landing page(s) or the more steps/pages it take to complete a conversion, the less conversions which means less money to G and us...

B. Enforce a conversion rate minimum to make sure advertiser conversions actually occur... Eg... your landing page would have to have a minimum of a 10% average conversion rate or else the advertiser would have to bid above the highest CPA price for their vertical category or keyword... in order for their CPA campaign to be Active

The min conversion rate could be calculated based on the current min CPC and the conversion rate of the advertisers landing page...

If the A in the PPA means a sale, they only way to game the system would be to buy stuff through fraudulent means.

Awwww ... Newbies are always so cute when they say things like that!

Furthermore, what happens when the advertiser has a big, bold, telephone number on their site and strongly encourages the visitor to call-in their order?

That's a problem in every affiliate network. But if you've got a small enough network policing it and "suggesting" changes to merchants is pretty easy. On Google's planned scale it would be impossible. Reporting a merchant for dodgy tactics could take months before anything is done. I've been in affiliate marketing for over five years now, I wouldn't touch a Google branded affiliate network with a very, very, very long barge pole. If I had a barge-pole that reached from my office to the Googleplex I still wouldn't touch it, not even just to see what it was like ...

Yeah, it could shake things up a bit, anything Google does shakes things up.

Although not totally relevant to the discussion I just wanted to voice my utter disbelief at statements such as this. I can't think of one thing that Google has done that is original or important enough to warrant the phrase "shakes things up". They are just a corporate giant trying to buy into every corner of already established markets. That is the only reason they are entering this one now, not because they think they can do it better, but because they think that they can make extra cash.

Although not totally relevant to the discussion I just wanted to voice my utter disbelief at statements such as this. I can't think of one thing that Google has done that is original or important enough to warrant the phrase "shakes things up". They are just a corporate giant trying to buy into every corner of already established markets. That is the only reason they are entering this one now, not because they think they can do it better, but because they think that they can make extra cash.

Hi Michael, Where have you been since 1999? 1. Link based algorithm - revolutionized search 2. Adwords text link cpc program - revolutionized online advertising 3. Adsense - Revolutionized publishing And personally, I think they are entering this market now as their effort to curb the MFA's that are currently plaguing the internet.

Interesting to see this conversation explode in the Adsense forum, not the adwords forum. It's the Adwords side of the model that will make or break the system and clearly CPA is less prone to fraud than CPC.

With Google making Urchin free to adwords advertisers, the riting (for me) was on the wall right then. Google will not bin the CPC model - they won't have to. They will simply BLEND CPC in Adwords with CPA in adwords, with a twist... the twist is that you give Google money upfront as an advertiser and Google takes the balance out on a cpa basis as the adwords tracking converts.

The model has been rattling in my head ever since last year's vegas. It is inevitable that this would be tried. Anyone know how I get on the Adwords side of this trial? (presumably there will be one...)

Most of the replies to this story are coming from publishers - I'll give you my thoughts as the owner of an ecommerce site.

I currently won't use adwords on third party sites (except at extremely low prices). The conversions for me are about 10 times higher from the search network than third party sites. So the way things stand now, publishers aren't getting my money at all.

As for phone numbers, I have my 800 number all over my site and it accounts for less than 20% of my sales. This loss of tracking becomes moot when you read my next point.

Trust. With adsense now, Google looks at performance of the ad to know which ones to show. They look at click through and cost. They will be able to do the same thing with pay for action ads. If I don't pay out for anything or take all orders over the phone, Google will see no money and stop showing ads. An advertiser may be able to get a few thousand free clicks as Google builds statistics, but over a relatively short period of time, Google will know about how much an advertiser pays per click on average. In my case, I would be willing to pay about $8 per sale, and I have about a 10% conversion rate for semi targetted incoming clicks. That works out to about 80 cents per click (although it will be in chunks - 1 in 10 gets $8) for the publisher whereas with the ppc model, I won't go above 1 cent per click because of the lack of targetting and fraud.

Actually Snap.com has offered CPA advertising since February 2005 (but CPC is also an option at the Listing level). Since then we've grown to several thousand advertisers, the majority of them using CPA.

CPA can be pretty powerful when mixed with content relevancy. I've been using a similar CPA system (cbprosense) for some time now with good results. The system display content targeted ClickBank products linked using your own aff id. You get paid a commission per sale (up to 65% in commission per sale from the product retail price).

95% of products are being sold via CB so commissions arenít lost due to merchants not placing tracking code on their pages. I have good experience with CPA so I'm probably in when/if Iím satisfied that Google properly enforces/addresses the merchant sales tracking issues.

for sure every advertiser will cheer. it's a perfectly comfortable pricing model for them, because financial risk is completely shifted on publishers.

moreover, google has to take steps to get advertisers into the content network again.

instead of cleaning up the mfa-polluted publisher network to assure a quality gain, they leave it as is and offer incentives. first thing was discount on content network, second step will be ppa.

i predict ppa ads eliminating cpc ads on a large scale.

i completely understand the advertiser-side comfort considering this advertiser friendly policy. but likely, publishers will lose money on this, so they make sure to avoid any kind of negative interventions in any case. some publishers will be forced to accept lower income through this new accounting system. others will exclude their ad space from ppa and migrate to other networks who offer a better profit. i for one will in no way participate in offering ad space for free.

The new game with CPA will be cookie musical seats, I earn the cookie, an MFA on my very own site or another resends the same visitor later on to the same merchant again, I lost the cookie and CPA earnings, except this time I am not even getting paid for those clicks. Whack the MFA battle will only get fiercer.

When I think of which model is more vulnerable to fraud, it is a toss-up.

With the CPC model, we are battling sweat shops in Nigeria clicking away on ads trying to beat the system monitoring it. Google is getting pretty good at blocking most of these and paying back advertisers for others.

With the Pay-per-action or sale model, the fraud now switches to a different group. Given the choice of telling G you had a sale and sharing the revenues, I'd have to guess "most" merchants are going to pad their numbers. Some might say this is only fair since they had to put up with click-fraud, but then that leaves us right where we started, except reverse. Now all the publishers will stop using the service, go back to niche affiliate marketing and G will have less real estate to show ads, and merchants won't get their cheap traffic anymore.

For me, I make just as much promoting niche affiliate programs as I do with PPC model. So the pay-per-sale model does work, HOWEVER it took me many years of trying hundreds of programs before I found the ones that actually honestly payout. Most don't pay out for the simple reason that they don't have to. I don't care how many merchants say they will tell G when they sell a product, I know from my experience over the last 6 years that that percentage of merchants is a small number.

So maybe in the long run its best for publishers to find those diamond in the rough affiliate/partners and build those relationships independently of the G's and the Y's of the world.

why will these networks never gain any relevant publisher popularity and struggle with an adequate coverage in terms of advertising real estate?

right, because the payout is significantly worse compared to adsense ppc.

google strategy?

stepping into the lucrative ppa market to regain advertiser acceptance and compete with ppa agencies. advertisers jumping on google ppa ads like crazy, because of efficiency aspects: in adwords, they now find not only the according coverage with the huge publisher base other providers lack, but also the much longed for risk insurance for their revenue.

do publishers stay with adsense?

we're apparently in an advertiser friendly environment with oversupply of ad space and massive incentives for the hard-fought advertiser base, so prices going down network wide. only high quality content websites may be capable of denying ppa ads and convince advertising prospects to play by the old rules. if there's no better opportunity, many publishers will be forced to accept the new (actually pre-adsense) rules. as said, time to look around for other options.

When I think of which model is more vulnerable to fraud, it is a toss-up.

This is why I believe fixed fees are the best way for advertisers to pay. While it's still subject to fraud, the locus of fraud is minimized to the ability to compromise the billing system, an account other than your own, or the monetary system (e.g. counterfeiting). In other words, it's no more subject to fraud than any existing commerce.

only high quality content websites may be capable of denying ppa ads and convince advertising prospects to play by the old rules.

Why would a publisher deny PPA ads, just because they're PPA ads? There is no good reason to do such a thing. OTOH, there is every reason to deny PPA ads of merchants who are in breach of contracts (ie. don't pay commissions). Furthermore, it is in a merchant's best interest to pay commissions, lest they risk being branded as a business risk.

I'm not saying that this eliminates PPA fraud. However, I think it is much of an improvement over PPC or CPM. There are more incentives to play by the rules, and less ways to break the rules.

how should that all work out for us? why don't they reflect about their new products first before they introduce them to the masses?

How do you know they have not been reflecting on CPA? It's not as if it's a new concept.

you just can't turn the advertising market inside out, gain monopolistic market share with the revolutionary cpc idea and then introduce ancient accounting methods no single publisher will gain from.

G is not obligated to adopt business models for the publisher's benefit only.

that's just not the way it works. we are too spoilt by cpc, we would never accept an accounting method that earns us but one penny less and makes us reliant on reported sales and landing page quality, that is advertiser-side things we have absolutely no influence on.

Dissatisfied publishers are free to sell their own ads, or charge users for content directly.

advertisers may cheer considering ppa features with 100% safe guaranteed income and margins. it's again shifting the risk distribution completely towards the publishers just like in the old days where earning money with content websites was simply not possible for most of us. a real regression.

I'm sorry that publishers stand to lose income. As has been said numerous times, it is not a good idea to base one's entire income on publishing revenues.

we just deliver qualified traffic for which we are paid for. all other things are out of our control.

The problem is the traffic is not qualified enough that advertisers are willing to pay for it. No disrespect to you intended; it is a problem of nonconverting traffic due to fraud, disinterested surfers, etc.

How do you know they have not been reflecting on CPA? It's not as if it's a new concept.

of course they have reflected about this in some way. but honestly, i didn't expect to have my statement to be taken literally. however, look at the product introduction of cpm image ads. i think by now it is safe to say, that it's far from being a success story. cpc revolutionized the market, because it offered an accepable distribution of risk for all participiants. introducing further accounting methods is not that easy.

G is not obligated to adopt business models for the publisher's benefit only.

oh.. really? but this is the adsense forum and i feel free to express my concerns regarding possible consequences to our income.

Dissatisfied publishers are free to sell their own ads, or charge users for content directly.

..or whatever. i know that my statements are heavy stuff to an advertisers' mind, but that's how we calculate. we watch our earnings as closely as every other business partner. furthermore: cpc has made publishers emancipated. indeed, it's an advertiser market. but it's not that we'd have to beg for money any more and join every shady affiliate network for minimal payout.

I'm sorry that publishers stand to lose income. As has been said numerous times, it is not a good idea to base one's entire income on publishing revenues.

yes, i'm sorry for that, too. it looks like ppa will reduce our income and will please adwords customers, as well those who have already made a fortune with ppc. lots of webmasters make a living solely from marketing their websites since years. that's as solid a business model than every other self-employment decision. actually one with minimum starting investment. what's dangerous, is to put all your eggs in one basket and not to diversify your income streams through different advertising partners. but that was not your point.

The problem is the traffic is not qualified enough that advertisers are willing to pay for it. No disrespect to you intended; it is a problem of nonconverting traffic due to fraud, disinterested surfers, etc. Basically, the shift away from CPC was inevitable.

fraud is a problem. fraud can be managed if the rules are policed. divergence loss is a problem. from a publisher point of view, i have to say, that ppa brings about a lot more divergence losses for me in terms of blending in advertisements mostly for free. the real problem that lies behind it is the distribution of risk, which with ppc was rather in balance for all involved and becomes insustainable for the publisher under a ppa environment. let's see if publishers (especially those with successful quality websites) are still ready to offer their advertising real estate under the new circumstances. you know every party in this game is dependent on the other side eventually.

I strongly believe that Google's interest is aligned more directly with the Publishers' interest no matter if it's a CPC or CPA because Google's revenue and Publishers' revenue are derived based on the same criteria and from the same source. This is true only if Google doesn't charge the CPA Advertiser a setup fee or activation fee or a fixed fee on top of the CPA fee.

So the battle is actually between Google and the Advertisers.

Scenario 1 : If Google's implementation of CPA can generate more advertising revenue, then the Publishers and G's shareholders also be happy.

Scenario 2 : If Google's CPA reduces advertising revenue, then G's shares/stock will tumble and the Management will have a tough time answering G's shareholders and the shareholders may well instruct G to go back to it's CPC. Afterall, the shareholders only care about the value of their stock/shares.

cpc revolutionized the market, because it offered an accepable distribution of risk for all participiants.

It seems the risk was not acceptable to enough advertisers.

fraud is a problem. fraud can be managed if the rules are policed.

If you have any suggestions on how to reduce click fraud that haven't already been tried, please let's hear them.

the real problem that lies behind it is the distribution of risk, which with ppc was rather in balance for all involved and becomes insustainable for the publisher under a ppa environment.

If the distribution of risk was considered acceptable to advertisers, G would not have felt it necessary to offer PPA.

let's see if publishers (especially those with successful quality websites) are still ready to offer their advertising real estate under the new circumstances. you know every party in this game is dependent on the other side eventually.

I don't think G is as dependent on publisher revenue as you say. They have lots of ways to bring in revenue. If publishers won't allow PPA ads on their sites, I suspect it will not cause sufficient duress to G's bottom line that they drop the PPA program.

Actually AdSense is ticking along quite successfully, so you could easily argue that the current model is very acceptable to advertisers.

The thing is that with a 100-billion-dollar-plus market value, they are under constant pressure to come up with new revenue streams.

<added> IMO Powerup is mostly correct that Google have to manage this without cutting into content network revenue. The stock market is very intolerant even of stalled growth, never mind negative earnings growth. </added>

Maybe not as dependent, but about 40% of their earnings are from the content network -- i.e. AdSense publishers -- (the rest is from the search network). This is quite a lot, when you consider that publishers get about 75% of the total revenues. (In total, the content network yields much more money than the search network.)

Actually AdSense is ticking along quite successfully, so you could easily argue that the current model is very acceptable to advertisers.

I said nothing about the absolute success of AdSense; I discussed how CPA is less risky than CPC or CPM. Given initial advertiser reactions to CPA, I'd say that there is some feeling that it is preferable to CPC or CPM. So these advertisers will have the choice to move to CPA. The future, of course, will depend on whether CPA becomes sucessful enough that a majority of advertisers switch to it.

Maybe not as dependent, but about 40% of their earnings are from the content network -- i.e. AdSense publishers -- (the rest is from the search network). This is quite a lot, when you consider that publishers get about 75% of the total revenues. (In total, the content network yields much more money than the search network.)

Revenues are not the entire story. What is the cost to G to support the content network? To analyze click fraud on it; to respond to challenges on charges; to hunt down and eliminate fraudulent publishers; to defend itself against lawsuits? What are the trends going forward? These considerations will have an effect on the decisions G makes, not just revenues.

I'd be surprised if G withdrew its CPA program based on some mass publisher movement to leave AdSense.